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USA: The spectacular fall of Wall Street's heroes


by Simon English Daily Telegraph
June 1st, 2004

One grim day last week, Jamie Olis left his plush Houston home to begin a 24-year prison sentence.

Until recently Mr Olis was a tax accountant for Dynegy, the Texas energy firm that wasn't quite as corrupt as its famous neighbour, Enron. Mr Olis had played the corporate game smartly enough to reach the company's upper-middle level before he became embroiled in a scheme to defraud investors.

He fell victim - his lawyer and other less biased observers agree - to an unprecedented government assault on corporate crime.

Mr Olis's mistake was to insist that he was innocent. If he'd done what most others, including his boss, did and agreed to co-operate, he might have been sentenced to a far less painful six years. Instead, he'll be behind bars until 2028, by which time the 38-year-old will be 62, and his now unborn son will probably have left home.

If this seems like a harsh punishment for securities fraud, it is in keeping with trends. Sentences for white collar crime have jumped since Ivan Boesky, the archetypal corporate criminal who was the inspiration for the fictional Gordon Gekko in the movie Wall Street, got three years for insider trading in 1987. Last year Sam Waksal of ImClone Systems got seven years while Andy Fastow of Enron got 10 years.

In comparison, rapists get an average of nine years; robbers get seven and murderers 20, according to the Department of Justice. It is three and a half years since Enron imploded and the US government, recognising that investors had lost nearly all confidence in the stock market, declared war on the businesses that went bad.

Although critics complained at first that progress was slow, or that investigators were pursuing the wrong targets, the clean-up has been remarkably swift by legal standards. Fraud investigations in the UK are notoriously long-winded and famously ineffectual.

Jacob Zamansky, a New York lawyer who first targeted dubious stock tips at Merrill Lynch, says: "The government is making a concerted effort to put corporate criminals behind bars. So far the results are good. A sophisticated group sits on juries in Manhattan. If it looks like crimes were committed, they are throwing the book at them."

Where are they now?

Martha Stewart: The home-making entrepreneur was convicted on March 5 of lying about why she sold shares in drugmaker ImClone Systems just before the price plunged. Although supporters argue she was unfairly targeted as a high-profile woman, in reality regulators had to look into an oddly timed stock trade. Once they did and Ms Stewart starting telling tall tales, they had little choice but to prosecute.

In theory, she could get 20 years in jail for the four criminal acts, though two years is more likely. She will be sentenced this month and has been forced to step down from the board of her company, Martha Stewart Living Omnimedia.

So far, her attempts to secure a retrial have failed. She is conspicuous by her absence from television, film premiers and red carpets everywhere.

Dennis Kozlowski: The corruption trial against the former Tyco International chairman ended in farce after six months of testimony - a blot on the Feds' record.

US media outlets named the one juror who didn't think Mr Kozlowski was guilty of pilfering several hundred million dollars from Tyco, leading to threats against the woman and a mistrial.

Mr Kozlowski emerged from the first hearing as a colourful character with an eye for women and terrible, if expensive, taste in home furnishings.

Although his reputation as a corporate hero is beyond repair, Mr Kozlowski is free on bail until a retrial is set.

His side has asked for the new case to be delayed until summer 2005, on the grounds that potential jurors have already been prejudiced against him. "We need some noise abatement," his lawyer told the judge.

Prosecutors want to start again in September. Mr Kozlowksi is, according to attorney Stephen Kaufman, "in good spirits".

Bernie Ebbers: Until this week the WorldCom founder was merely accused of orchestrating the largest accounting fraud in history. Six more charges were filed last Tuesday, taking the maximum sentence faced by Mr Ebbers to 165 years.

A judge has restricted the 62-year-old's movements to three areas - Mississippi, New York and Columbia - under a $10m bond.

Scott Sullivan, WorldCom's former chief financial officer and the nice cop in the "Scott and Bernie show" that so wowed Wall Street, has pleaded guilty and agreed to help investigators get Mr Ebbers. The defence will argue that Mr Sullivan was placed under intense pressure by prosecutors and didn't in fact do what he admits he did.

Aside from preparing for trial, Mr Ebbers has been managing his rice farm and teaching Sunday school.

Ken Lay: Nothing has been heard from the man George Bush called "Kenny Boy" and Enron staff called something far less jovial for many months.

The former Enron chairman is the man most closely associated with America's corporate crime spree and the only one of the big names not yet charged.

Cynics suggest this may be because of his political connections - he was the president's biggest financial supporter - but it's more likely that investigators are merely working their way up the chain. Chief financial officer Andrew Fastow gave his co-operation, which led to charges against former chief executive Jeff Skilling. Mr Skilling may eventually tell prosecutors everything he can.

Mr Lay's strategy seems to be to keep quiet and hope the Feds have forgotten him. They have not.

Jeffrey Skilling: The leader of Enron's notorious "Mighty Man" team - a band of energy traders who would get together at weekends for extreme sports and drinking - was last seen creating a public disturbance on Park Avenue in Manhattan at 4am.

Depending on whom you believe - the police or his lawyer - Mr Skilling was either trying to escape pests or grabbing fellow bar patrons to shout, "You're an FBI agent and you're following me."

It is not disputed that he was taken to hospital in a distressed state, which is perhaps not surprising for a man charged with 35 counts of insider trading, fraud, conspiracy and making false statements. He remains free on bail of $5m, though a judge has ordered him to seek alcohol treatment.

Frank Quattrone: The former Credit Suisse First Boston executive is what a banker ought to be - a dry character who is good at making money if not conversation. Little is known about him other than that he has a dodgy moustache and likes golf.

Now a poster boy for the way banks pumped up the internet boom and left investors holding the deflated bag, Mr Quattrone was found guilty of three charges of witness tampering and obstructing justice.

By many accounts, the jury in the trial was ready to find him innocent until he himself took the stand, when a nervous, far from charming performance landed him in trouble. This week his lawyers asked for another trial, claiming the jurors had been given "erroneous" instructions by the judge.

The 48-year-old can expect a sentence of one to two years if his appeals fail.

Andy Fastow: "Fast Andy", the finance wizard who concocted the offshore subsidiaries that Enron used to hide debts, was slow to confess. He cut a deal with the Department of Justice in May that will see his wife, Lea, serve a one-year term for a tax misdemeanour, before his own 10-year sentence begins.





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